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Online Retailer

Autor:   •  March 29, 2016  •  Case Study  •  582 Words (3 Pages)  •  652 Views

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  1. On-line retailer
  • No Receivables/ Days of Receivables: Since an online retailer mainly caters to individual customers, who usually pay by cash or credit card, accounts receivable are negligible.
  • Low Net Plant & Equipment: An online retailer will not have a huge facility as compared to a manufacturer. Retailers typically just own an office and a warehouse to stock its own inventories.
  • Unearned Revenues: Since some customers pay by credit cards, there is some unearned revenue (not negligible)
  • High R&D/sales ratio: online retailer is R&D based. For instance, the R&D constantly work on more convenient payment system and customer information security.

B) Supermarket grocery retailer

  • High Inventory turnover: Supermarket grocery retailers have high sales volume. Supermarkets need to make sure the food is fresh, so they will limit the inventory based on the estimated sales.
  • Relatively low gross margin: Even though the sales volume is high, the prices need to be stable and low since customers are price sensitive, they are willing to go to another supermarket if the price is lower.
  • Low receivables: customers pay when they buy the grocery

C) International hotel chain

  • High Net Plant & Equipment: since this company is an international hotel chain, large portion of its properties will be all over the world. This also generates high long term debt.
  • Days of receivables is not meaningful: For hotel business, customers pay by cash or credit cards.
  • Inventory Turnover not meaningful: most of inventory is renting and not selling to the customers.

D) Major passenger airline

  • High net plant & equipment: the main assets of airline are planes.  (larger than hotel chain)
  • High unearned revenues: customers pay for tickets before they take the flights

E) Manufacturer and marketer of consumer products

  • High net plant & Equipment: Main noncurrent assets for manufacturer are plant and equipment.
  • High gross margin: the sales volume is high

F) Pharmaceutical company

  • High net income/sales: pharmaceutical companies have high revenue because they have patent for their drugs. They can set the drugs at high price, so their net income is high.
  • High net income/assets: pharmaceutical companies have low assets because patents are not recorded as assets in balance statement and there are a lot of expense in R&D.

G) Manufacturer of electronic communications equipment

  • Lowest inventory turnover: manufacturer has high inventory. The sales is low because electronic communication equipment does not need to be changed very often.
  • Low net income/asset: the sales is low so the net income is low. The assets of manufacturer are high since it has large plant, many equipment and inventory.

H) Warehouse club for food and general merchandise

  • High net plant & equipment: Since it’s warehouse club, the main noncurrent asset is the warehouse. 44.8% net plant & Equipment out of 45.9% total noncurrent assets
  • High inventory: Similar to supermarket retailer, the main current asset is inventory. Since it is warehouse, the inventory should be higher than the supermarket retailer.

I) Temporary staffing agency

  • Highest receivables account: the company uses large portion of human capital. Only when the service is done, the payment is made.
  • Lowest gross margin: the company has to pay the employees while providing services to customers. Also, many sales have to be held until the services are done.
  • No inventory: it is a service company, so there is no inventory

J) Developer of prepackaged software

  • High R&D/sales: R&D team constantly renews the existing software and develops new software
  • High gross profit: the software is easy to duplicate and the cost generated with sales is very low

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